Marathon to buy San Antonio’s Andeavor for $23.3 billion

File photo of Andeavor refinery in Anacortes, Wash. Marathon Petroleum is buying San Antonio-based Andeavor for $23 billion, the companies announced Monday.

File photo of Andeavor refinery in Anacortes, Wash. Marathon...

Marathon Petroleum is buying San Antonio-based Andeavor for $23.3 billion, moving away yet another local company and creating the nation’s largest refiner, the companies announced this morning.

The deal will pay Andeavor shareholders $152.27, a 24 percent gain over Friday’s closing price, or 1.87 shares of Marathon stock for each share of Andeavor, according to a press release announcing the merger. The merger, which was unanimously approved by both boards, is expected to close in the second half of this year. The total value of the deal climbs to $35.6 billion after taking into account Andeavor’s debt.

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“This transaction combines two strong, complementary companies to create a leading U.S. refining, marketing, and midstream company, building a platform that is well-positioned for long-term growth and shareholder value creation,” said Marathon Chairman and CEO Gary R. Heminger, who will lead the combined company. “It geographically diversifies our refining portfolio into attractive markets … enhances our midstream footprint in the Permian basin, and creates a nationwide retail and marketing portfolio that will substantially improve efficiencies and enhance our ability to serve customers.”

Andeavor CEO Gregory Goff will serve as executive vice chairman and will get a seat on the board. Marathon’s home in Findlay, Ohio will serves as the headquarters for the combined company while it maintains an office in San Antonio where it has 1,500 employees, Heminger said on a conference call this morning. The company has a total of 14,000 employees across the U.S.

“We are very early in the process for Marathon Petroleum to determine the best approach to running our combined operations,” said Andeavor spokeswoman Destin Singleton. “We plan to maintain a presence in San Antonio.”

The combination will create a company with an enterprise value of more than $90 billion and is expected to save $1 billion in “tangible annual run-rate synergies” within the first three years, according to the press release. Heminger also announced a $5 billion share buyback program, saying the board was confident the deal would generate “robust cashflow.”

“With both companies, we have under promised and over delivered on our synergies over the last number of years. Both of us have shown that we can execute on major projects,” Heminger said on the call. “There will be synergies around the combination of the two offices,” he said, adding that the refining segment also has siginficant overlap.

The two companies compliment each other with Marathon operating mostly to the East of the Mississippi River and Andeavor to the West, a point executives said would ease regulatory approval.

“Because there is very very little-to-no overlap between the two companies, the process for approval shouldn’t be anything unusual,” Goff told analysts on the call. “We don’t see anything we have to deal with that would create any complications.”

The combined companies usurp San Antonio-based Valero Energy Corp. for the top spot among U.S. refineries, Andeavor and Marathon said. Valero is currently the largest with a capacity of 3.1 million barrels a day between its 15 refineries in the U.S., Canada and the U.K.

Formerly named Tesoro, Andeavor operates 10 refineries and has a capacity of about 1.2 million barrels a day, according to its website. Marathon is the nation’s second-largest refinery with a capacity of about 1.9 million barrels a day, according to its website.

Marathon-branded gasoline is sold in 20 states while its Speedway unit owns the second-largest convenience-store chain. The combined company will have about 4,000 company-owned stores and 7,800 branded retail locations, Goff said on the call.

The deal takes away another homegrown San Antonio company.

C.H. Guenther & Son Inc. sold to Chicago private equity firm Pritzker Group earlier this month in a deal reportedly valued at as much as $1.4 billion.

Rackspace Hosting sold to New York private equity firm Apollo Global Management in a deal valued at $4.3 billion in late 2016. Convenience chain operator CST Corp. also sold that year to the Canadian owner of Circle K, Alimentation Couche-Tard Inc., for $4.4 billion.